Is fantasy sports betting legal? Here's what you need to know

Updated on Sep 18, 2015 at 11:35 PM EDT

The daily fantasy sports industry is eyeing a breakout season as NFL games begin. And its two dominant companies, DraftKings and FanDuel, are touting lucrative opening week prizes to try to draw more customers as more competitors pop up.

Fantasy sports betting has become ubiquitous, as anyone who's ever watched ESPN can attest, with a barrage of marketing from websites like DraftKings and FanDuel.

Such websites promise sports fans the opportunity to win hundreds of thousands of dollars on daily fantasy games in which players can bet on the performance of their favorite players from the NFL and other professional sports leagues in hypothetical match-ups.

While fantasy sports betting bears striking similarities to online gambling, the pastime is legal due language in the Unlawful Internet Gambling Enforcement Act of 2006. Fantasy leagues are legal, the rationale goes, because they are games of skill and not games of chance.

The number of players grew to 57 million across the U.S. and Canada this year, a more than 500 percent increase in the last three years,
according to an Ipsos Public Affairs study
conducted for the Fantasy Sports Trade Association.

One recent proposal would allow Pennsylvania to capitalize on this growing industry by permitting brick-and-mortar casinos to host their own fantasy leagues.

Rep. George Dunbar
Office of General Services

Rep. George Dunbar
, R-Westmoreland County, filled us in on the bill he's sponsored and how fantasy sports fit into the state's existing gaming industry.

Can you tell us about what your proposal does and where it stands currently?

I believe we have a public hearing scheduled for later this fall in the (House) Gaming Oversight Committee. Hopefully, it can move forward as a separate bill or as part of an overall omnibus gaming legislation. We may put several proposals into one bill or do them individually.

What
FanDuel
and
DraftKings
and these other places are doing is totally legal and, realistically, anyone can do fantasy sports gaming if they want to. My bill codifies it so that, if casinos want to, they can run some type of fantasy sports.

The goal is for casinos to attract as many people as they possibly can. If you go to casinos, you see it's an older population that goes there and the casinos are always trying to draw in younger people.

What's preventing casinos from hosting fantasy sports leagues now?

There's nothing under our gaming law that allows them to collect money and distribute money on a fantasy sports tournament. Although it would not be illegal, it's not codified under our gaming laws. All the bill would do is say, "You can do this if you want to, to hold daily tournaments and attract people if you want to."

The Rivers Casino sits on top of Heinz Field (where the Pittsburgh Steelers play home games) and this could help them to draw in people on game day. A lot of individuals may hang around the casinos if they have some vested interest in the sports events that are going on. This would be overseen by Gaming Control Board, set up by the board. Casinos aren't going to do anything that would jeopardize their license at all.

Have any casinos expressed interest so far?

I've talked to pretty much most of the casinos and I don't think any of them look at it as some type of panacea that will draw lots of people, but it's an alternative. They've been very vocal about finding alternatives to stay competitive with all the neighboring states that have opened casinos, Ohio and Maryland. They know they're not going to make a lot of money on this. This is essentially collecting money and distributing what they collect. It's about attracting people to the casino.

Why are the profit margins low for fantasy sports betting?

Just like with online poker, the way you get a large (profit) is on volume alone. So, Draft Kings may have millions of players. Let's say they pay $5 in a one-day fantasy sports team. Out of that $5, one million players, $5 million goes to DraftKings and they may pay out $4.9 million.

(Casinos) can make the percentage of payouts different, but what attracts people is the lottery aspect of having a big hit for a small investment. That's what motivates people to play the big Lotto. They know the chances are really remote, but a lot of people still play it because it's a small investment to potentially win big.

A lot of people who are just hearing about this, and it's become a very large industry, would probably be surprised to hear it's legal.

It's huge. It's huge. This goes back to the big gambling of Internet gaming. In early 2010 or 2009, the
federal government shut down all the online poker sites
under a law called UIGEA . . . but fantasy sports was specifically exempted, so DraftKings and all these other websites said, "Hey, look, we don't even have to be underground." Back then, online gaming existed everywhere. You can play it now if you want to: Their underground, offshore.

Under UIGEA, (the fantasy sports websites) came out from underground and captured a huge market share by advertising. It's everywhere. I'm a baseball geek myself and you can't watch a baseball game without someone advertising DraftKings. A lot of millennials are doing it; that's why we think our casinos could benefit from doing it."

Have you tried fantasy sports?

I've been playing fantasy baseball for almost 30 years, when it first came out of some backwoods restaurant in NY. I have a group of guys doing this together for 30 years; essentially we're not doing it the way the daily or weekly leagues are doing. We have a season-long thing where we draft the players. I've never been to one of those websites, so I don't know how they work, but it's legal.

You mentioned the possibility of this becoming part of a larger gaming bill. Where does that stand and what could be included?

Another is legalized slots at airports, expanding where gaming could be and video gaming terminals, called VGTs, which are legal in Illinois. They're essentially video machines in bars.

All of (the proposals) have supporters and detractors. I think coalescing behind one thing could make people happy. But, then again, you also have to have the support of the (Wolf) administration. (The various gaming proposals) have not been part of the discussion on budgets.